What is the Importance of Business Plans?

  • This question, unlike many other entrepreneurial questions, does not have a perfect answer, thus I would want to express my bias regarding it. When I was very young, typewriters were still in use, but it was a long time before personal computers and WordPerfect software became common (I am definitely dating myself with the WordPerfect reference). Therefore, it would have probably been more work than it was worth if I had taken the time to draft a business plan for my lawn-cutting company when I was eight or nine years old.

    Let's examine a couple of situations. For someone who wants to establish a firm, has been an entrepreneur for a while, and has very little capital, it appears to be a business plan with little to no advantages. In contrast, a scientist who wants to launch a biotech company but has never been an entrepreneur may require a strong business strategy to assist them to think through the concept and raising money.

    I think a business plan is not always necessary, in contrast to top business schools that still emphasize it, and I think people spend too much time making plans as opposed to entering the market and acquiring consumers.

    As you can understand, I have my doubts regarding business strategies. I'm not a huge fan of business plans since they force entrepreneurs to make assumptions that could not be accurate representations of the state of the market.

    The development of a business is not the same as conducting Handel's Messiah. While conducting the Messiah, it is common to make minor tempo and other alterations, but the overall structure of the music should stay the same. That is not how entrepreneurship is and never will be.

    Even after a thorough investigation, assumptions about entrepreneurship are susceptible to significant change. Contrarily, the real world is not a static document like a business strategy.

    Not to mention, I don't want to provide a false impression on a crucial topic. Many organizations could profit from careful planning and study when analyzing a market. Entrepreneurs would profit from conducting a thorough market analysis prior to releasing any relatively sophisticated product or service, albeit even this is subject to certain genuine limits. It makes no difference how you conduct your research.

    I wasted a lot of time since I didn't take my potential market at Sageworks into account. We had to do a lot of trial and error as we learned our market in order to translate financial statements into plain-language evaluations. I've only ever written a business plan for Sageworks, and it was a success. 

    When thinking about a company plan, it's a good idea to ask yourself if your time would be better spent finding new customers and marketing your product. Typically, yes is the response.

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